How COVID-19 reliefs impact Research & Development Tax claims – update

HMRC have sent us further details clarifying their stance on certain COVID-19 reliefs.

The Bounce Back Loans (BBL) Scheme

HMRC has confirmed that this has been notified as a state aid, following similar notification of the Coronavirus Business Interruption Loan Scheme (CBILS). Being in receipt of the BBL or CBILS could impact a potential R&D tax claim, particularly if it relates specifically to R&D expenditure rather than being used more generally to support the Company as they are intended. An area to watch out for when drafting loan applications.

The Future Fund

The Future Fund provides up to £500m in convertible loans to high-growth innovative businesses and is not a state aid. The convertible loans are commercial, meaning they are not caught by s1138, allowing a full claim can be made under the SME scheme if eligible.

Temporary Framework grants/loans

A significant number of small loans and grants have been provided recently through the Temporary Framework. These are deemed to be notified and will impact an R&D claim the same way as if a General Bock Exemption grant had been received in relation to a project. These are normally much smaller in size but can have a significant impact to a potential claim. It’s important to consider how these interlink with your R&D projects fully to avoid falling into any traps.

Deferred Liabilities

HMRC have confirmed that the VAT deferral scheme, which has been introduced in response to COVID-19 will not impact payable SME tax credits. The scheme defers the VAT payment due date to the end of the tax year, therefore, deferred VAT payments in this period are not overdue and HMRC has confirmed that R&D claim payments will not be offset. For RDEC payments, the legislation requires HMRC to offset the RDEC payment against other HMRC liabilities. This includes any PAYE/NIC or VAT payment which was overdue and HMRC does not have the power to provide a temporary relaxation of this rule.

If you have a query about accessing COVID-19 grants and support, please contact our team today at covid@chiene.co.uk.